Digital Channels Grow Apace in Southeast Asia
April 28, 2021 — Singapore
While digital platforms have captured an increasing amount of assets in a short period of time, banks are expected to continue dominating fund distribution in the foreseeable future
Southeast Asia’s digital advisory space has been brimming with activity, gaining users and assets, thanks to lockdown restrictions due to the pandemic.
However, despite the proliferation of robo-advisors and digital platforms, banks continue to hold the lion’s share of assets across many Southeast Asian markets. This is largely because these digital platforms target millennials or first-time investors with small investment amounts. Competition in the digital space is also heating up, with the entrance of players such as Grab and Australia-based micro-investment platform Raiz Invest.
Nonetheless, many regional banks are developing their own digital platforms to reach out to investors. In February 2020, DBS launched the DBS Portfolio Advisory Enablement Tool (PAET), which performs a thorough assessment of a client’s portfolio performance and risk exposures. This followed OCBC’s launch of OCBC RoboInvest in August 2018, which includes 28 thematic portfolios covering six different markets. In Thailand last November, Kasikorn Bank rolled out FinVest, an online wealth management platform, in collaboration with Lu International and Robowealth.
As for asset managers surveyed by Cerulli, increasing the use of online sales has been a top priority for many over the past two years. The COVID-19 pandemic has forced managers to accelerate their digital plans, particularly in enabling investors to invest online. In Malaysia, BIMB Investment Management rolled out its BEST Invest mobile app in April 2020, followed by Affin Hwang Asset Management and Hong Leong Asset Management, launching their mobile apps in January this year.
Regulatory initiatives in some markets have also been supportive of fintech developments. In 2017, Securities Commission Malaysia created a digital investment management licensing framework and to date, eight companies have received these licenses. Cerulli understands that the Malaysian regulator has also set up a digitalization group, comprising key stakeholders within the asset management industry, to discuss issues faced by industry players on the digitalization front.
Despite the competition posed by digital channels, Cerulli believes that banks are likely to continue dominating fund distribution in Southeast Asia for the foreseeable future. Banks often serve as one-stop shops for investors as they provide more products, including loans and insurance, as well as priority banking services. Furthermore, it is hard to replace the bonds between investors and banks. Hence, some investors might still prefer interacting with their relationship managers, leaving robo-advisors more suitable for tech-savvy investors. However, banks are expected to adjust their strategies and put more resources into building online platforms and investing in e-wallets.
“Although robo-advisors do not yet pose a significant threat to other distributors, they are helping to increase public awareness of the benefits of investing, which could in turn make it easier for banks and managers to sell their investment products to these investors in the future,” said Shannen Wong, senior analyst with Cerulli. “This supports Cerulli’s long-held view that online platforms and robo-advisors will enhance distribution reach, rather than disrupt traditional distribution channels, in the foreseeable future.”
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